An Interview with Rick Watson
Pipe17’s CEO Mo Afshar had an opportunity to sit down recently with Rick Watson, a leading ecommerce industry pundit, as part of our recent virtual event, How Established Brands Launch & Scale on TikTok Shop.
Calling Rick a living legend in our industry is no hyperbole. He spent 20+ years as a technology entrepreneur and operator exclusively in the ecommerce industry with companies like ChannelAdvisor, BarnesandNoble.com, Merchantry, and Pitney Bowes. Now he runs RMW Commerce Consulting, a boutique strategic consultancy based in New York City focused solely on helping digital commerce teams. He also hosts a podcast, The Watson Weekly, where he shares an unbiased, unfiltered expert take on the retail sector’s biggest news and players.
If you missed our amazing TikTok Shop launch event, you can now register to watch it on-demand.
The action-packed agenda featured not only Rick Watson but also speakers from TikTok, Everything Bagel, Gorgias, Manufactured, Northbeam, Orca, Recharm, ShipBob, Vajiro, Videowise, and Smart Marketer.
Now onto Mo’s conversation with Rick. You can watch the full interview with Mo, Rick, and Logan Dunn from Wyze, or read an edited (for both length and clarity) transcript of the interview below.
Mo Afshar, CEO of Pipe17
It’s a real pleasure and a real honor to have Rick as part of this event. Of anybody who’s been in the ecommerce landscape, Rick has got not only all the battle scars of building companies over the decades, but also he’s got great experience from chatting to basically everybody within the ecosystem, whether it be brands or software providers or service providers.
Rick, I read a note from you when TikTok Shop launched that very eloquently captured the opportunity as well as the gravity of the change that we’re about to see within the ecommerce landscape. When was the last time that a major ecommerce platform was launched that is going to be in the top five. It’s just a question of where TikTok is going to be in that top five.
So as you look at your crystal ball, how do you see the impact of this launch on the market in general? What’s the impact on retailers, brands, merchants, and others within the ecosystem?
Rick Watson, Founder and CEO of RMW Commerce Consulting
There are a few different aspects to think about regarding TikTok.
Clearly, I think any brand that’s started in the last three years is probably already leveraging TikTok because they have the best discovery algorithm and a lot of user intention. There’s a lot of buyer intent there too. Think of direct-to-consumer brands that are starting a business. What is your biggest risk? Your biggest risks are really two things: one, is your product any good at all and two, can you attract followers. Well, if you have a halfway decent product and if you’re halfway interesting, TikTok is a great place for you to track those followers. So that gets you over product/market fit, all in one platform. That’s really the promise of TikTok for the ecommerce market – particularly for new creators and entrepreneurs.
I think bigger brands are usually a little bit slower, a little bit more cautious. It’s going to take them more time to figure out, if ever. Sometimes they never figure it out! Sometimes it’s just sort of a DNA thing. But that’s the starting point I would use for this discussion. It’s not necessarily the place where you’re going to put all your eggs in that basket. But certainly for a company that’s just beginning, you’re going to put a lot of your eggs there because that’s where a lot of buyers are.
Mo Afshar
That makes sense. One of the key things that you touched upon that we’re excited about is the audience. If you look at many other platforms, you could argue Amazon has the audience, right? Because many shoppers go there as a default search engine for goods. But outside of that, it’s hard to imagine what other platform has such an audience. TikTok has an amazing growing, engaged audience. It will be super interesting to see the impact on the market.
People in any business often talk about the flywheel. Investors always talk about the flywheel. In TikTok’s case it’s really interesting. How do you see that flywheel? It is obviously different from many other platforms.
Rick Watson
The great thing about TikTok is that the flywheel was built before they launched ecommerce. The flywheel is really based on the amount of data, the amount of users they have, the amount of content those users are producing, and the quality of the discovery algorithm itself. There’s really no one who doesn’t agree with the fact that TikTok is the best discovery algorithm for videos and content in the industry… period.
That actually comes from their parent company, ByteDance. Everyone may not know the sister company of TikTok called Douyin in China, which is essentially the Chinese version of TikTok. It’s actually where the original discovery algorithm came from. So TikTok has a cheat code in terms of knowing an algorithm that will work if you just feed it users and content. They’ve been able to do that. They’ve really been able to track the younger audience in the United States, and that continues to age up each year.
If you think about 12 years ago, no one thought about their grandparents on Facebook because you had to have a .edu email address to even get on Facebook. It was for college kids, and for no one else basically. TikTok is going to undergo much the same evolution in the next five years. It’s in the early part of its breakout into the mainstream. Over the next couple of years you’ll see it firmly in the mainstream with even late adopters. We’ll start realizing this finally three or four years from now.
Mo Afshar
It’s interesting how much interest we’re seeing not only from emerging brands, which you would expect, but also existing brands. Pipe17 is having discussions with a lot of Fortune 1000 companies. A lot of companies are looking at how they can bring the store experience into the digital channel.
Think about companies like REI and their experts in the green vest, right? They’re always wondering how they take that kind of format – which is really one of the reasons you go to REI because you have that expert advice and opinion – onto a digital platform. TikTok is one of the most perfect platforms to bring people and information and commerce together.
Rick Watson
If you look at what TikTok is about, it can support brands at every part of the buying cycle. It could introduce you to a new brand that you haven’t heard of before. It could help you explore a new category and consider the types of brands, to choose between brands. It could help you decide when and how to make a decision. You could also see advocates of particular brands, post-purchase, unboxing videos, how to use the product – no matter where you are in the product life cycle. TikTok is an interesting platform for this.
Brands actually have to pay attention to all of those things when people are looking for a product in the category that you’re in. They’re trying to figure out: if I’m going to buy a new piece of furniture or a new piece of fitness equipment, what do I need to think about as I make this purchase? What brands might be interesting? Which brands fit me as a consumer? The fact that the discovery algorithm for TikTok is so big, it’s able to not just have generic videos show up for me, but have videos that are attuned to who they know I am as a consumer. That’s really the promise of TikTok for a lot of brands.
Mo Afshar
That’s a great point. The ability to connect to new audiences and engage new audiences is something that certainly we’ve seen in our customer base is unparalleled with the TikTok platform.
They just introduced this morning, the Shop Tab. What is it?
Rick Watson
That’s a good question. The Shop Tab is going to bring a few things to TikTok.
Number one is personalization. You’re not just going for a product scrolling experience, scrolling through product detail pages and videos that are entirely shopping focused, meaning a video that’s not shopping oriented will not appear. But if it’s a video that’s shopping oriented that is associated with a product or a live video stream, it’s going to be there and it’s going to be personalized to you. Whereas through the main TikTok screen, you’re just going to be seeing whatever. Maybe during a different time of day you’re in “entertainment mode”, and other times you’re in “shopping mode”. Depending on what mode you’re in using TikTok, personalization is going to be a big part of that experience.
I’m very interested in the persistence of the traffic to the shop itself. One of the things that Amazon has been able to do in the past couple of years is really incent its sellers to send organic traffic to Amazon. The way it does that is by essentially reducing your fees. If you’re using Amazon’s affiliate code, Amazon will give you a credit against your fees if you send them traffic. I’m interested to see if TikTok follows that same formula. Does TikTok believe this platform is going to be a closed loop ecosystem? You’re going to be here, or you’re going to be nowhere. That off-platform traffic is an interesting part of this.
Finally, TikTok becoming a marketplace means they now have marketplace problems. Marketplace problems include things like prohibited items. You can’t sell everything on TikTok. You’re going to have to ship within certain timelines, or probably you’re going to be demoted in the app. TikTok now has to worry about things like seller fraud. Are you a good seller? Can you prove that you are a real business that has products to sell? Can you prove that you have title to the products that you’re selling? You could be taken down if those aren’t true. All of those things are interesting components that going forward TikTok will shake out.
For now it’s just more about traffic, just tons of eyeballs, and some of them are going to convert.
Mo Afshar
Is TikTok going to overtake Amazon as an ecommerce channel, and how?
Rick Watson
Amazon has something that no other platform has or has found. Look, ecommerce is logistics and Amazon is the best logistics company in the world. If I buy something, I know I’m going to get it today or tomorrow. That’s not the case on TikTok.
Primarily, almost like a Shopify store, TikTok is a place to learn about things you might not know about. It’s a place for your wants and desires. Particularly for items that have a longer discovery period. It’s just not about something you need for your day-to-day life, or need tomorrow. That’s what you’re going to go to Amazon for. I think TikTok could be, and you could still look. But a lot of people are still going to buy those products on Amazon just because they know and trust Amazon, and their preferences are already on file. Right now TikTok is just a different audience than the traditional ecommerce audience.
Mo Afshar
Excellent. Well, great advice to the TikTok team. Rick, really appreciate your time and sharing your insights here. Thank you!
